The applicant (“Coast Capital”), which was the trustee of RRSPs and RRIFs, was assessed under s. 116(5) for failure to withhold on its purchase of shares (that were taxable Canadian property) of Canadian companies from non-resident vendors at prices which were substantially in excess of those shares' fair market value (with the result that the RRSPs and RRIFs were stripped of funds which ended up in offshore accounts or were applied to pay the fees of the "promoter.") Gleason JA found that any deception of the trustee was irrelevant to the assessment, which turned only on the trustee having purchased taxable Canadian property shares from a non-resident, so that a proposed addition to the Coast Capital pleadings, alleging the purchase transactions were shams, was rejected.
Coast Capital also sought an amended pleading that the cost to it of the shares was their fair market value (arguing, para. 28, that “not all of the amount transferred was given to purchase the shares but that some portion was given for the purpose of conveying benefits to the annuitants and the promoters.”) In rejecting this proposed pleading, Gleason JA stated (at para. 31):
While Stirling…was decided in the context of interpreting the term “cost” in the context of the ITA provisions on capital gains, it applies equally to the definition of “cost” in subsection 116(5)… . The cost of the shares to Coast Capital is what it paid for them and, for purposes of discerning their cost to Coast Capital, it matters not what their actual value might have been nor how the promoters might have diverted the funds paid by Coast Capital for the shares after the funds were paid out of the RRSPs or RRIFs.